Putting Down the Hammer
In order to grow, you’re going to need to hire other people, because there are just so many hats you can wear. But divorcing yourself from parts of the business in this way is difficult and frightening. Who can do your job better than you? How can you give up so much control?
The conditions that push you in this direction might be anything from the number of jobs facing you to, as Paul Floramo, general manager of Home Improvement Showcase in Rochester, N.Y., says, “getting older and [realizing] there is only so much time you can spend on knees and ladders.”
One rule of thumb for deciding to start hiring, Linda Case says, is “when the individual can no longer do it all.” Yet Case recognizes that companies are rarely completely prepared for the changes they have to make, especially early on, because there’s often “not enough money in the bank account to do it.”
But if you’re wearing several hats — for example, carpenter, sales, and office manager — you need to understand that each of those hats has a dollar value — which you’re most likely not paying yourself. Hiring people to replace you means having to put money into each hat.
By taking on employees, you’ll be able to use your time differently — to sell, most likely — and make more money.
Case suggests organizing by writing everything down and remembering to plan for growth in the sense of markup. “If I’m getting a 30% gross profit and thinking about hiring an office manager who I’m going to pay, with benefits, $35,000, I’ve got to bring in additional volume of $117,000 just to pay that person,” Case says. “Where people get off track is they make decisions based on how they’re feeling at the moment” instead of looking ahead. It’s always a balancing act, but hiring a certain number of people is necessary for growth.
Keohane says you need to go for it. “You’ve got to add the overhead first, and the revenue will follow.”
The Company is Not Me Hiring employees, seeing yourself as a professional, and fitting into the wider industry go hand in hand with the idea that to succeed you have to work on the business and not in it. Remodeling companies are “not really businesses; they’re practices,” Richardson points out. “At some point the business can’t grow if it must depend on [the owner].”
If that’s the case, an owner won’t be able to make objective decisions based on the needs of the company, an entity separate from him or herself. “An owner can decide to do an unprofitable job — it’s my friend, or my uncle, just a small job, whatever,” Hodgdon says. “It’s harder to justify committing the company’s resources to do an unprofitable job.”
Hodgdon also argues that by focusing on the business, owners will begin to “chase profit, not dollars.” Only then will they become motivated to produce accurate job cost reports, allowing them to “identify what kind of work their company does well, reliably, and profitably, and even more important, which jobs are losers,” she says.
Graves, who put down the hammer early on to focus on sales, says, “Every January, I look at how the last year performed, how I think the market will go, and the areas I want to have less involvement in, more involvement in, possibly new profit centers.” He also looks at things he’s doing poorly in and where he wants to cut down his involvement. “When I get that straight as to what I want to do and what I feel are reasonable goals for the following year, I put that on paper,” he says.
Gaining objectivity and some distance frees you to spend time creating formal business and marketing plans and, somewhere down the line, an exit strategy.
Richardson says he recently traveled around the country giving talks to remodelers. Maybe 5% of the people in the audiences, he says, raised their hand when asked about having a business plan.
He stresses this as an important goal, as well as having an exit strategy. “It doesn’t mean you want to get out now. You’re thinking far enough ahead to build equity that’s transferable or that you can reap the benefits of,” he says. “If you have an exit strategy, that’s a healthy place to be, regardless of how long you stay in business.”